Mistakes that are commonly done by taxpayers in filing ITR are listed below. These mistakes may create some problems or may bring tax notice for the tax payers. So it is beneficial to avoid such mistakes that are given below:-
- Filing ITR using the wrong form
as per rules given in income tax laws, it is mandatory for taxpayer to show all sources of income and ITR will be filed in correct form which is applicable to him. If a taxpayer file ITR in a wrong form then that ITR will be treated as ‘defective’ and taxpayer will require to file the revised ITR in correct form.
“In above case, some time will be provided to taxpayer to rectify mistakes. Taxpayer will be required to file the rectified return within 15 days from the date on which intimation is received u/s 139(9). If assessee apply for time extension and assessing officer will agree then time can be extended by assessing officer. If mistakes are not rectified within time then the return will be treated as invalid return or treated as return not filed at all. Taxpayers will be liable to pay the penalties of non filing of ITR and also liable to payment of some interest u/s 234A for delay filing in ITR.
2. Not reporting interest incomes
it is compulsory for every taxpayer to report all the interest income received or earned during the financial year (for which return is filed) in his ITR. Normally it has been notice that individuals generally forget to show the interest earned from savings bank accounts, fixed deposits, recurring deposits etc. All the interest discusses above are shown under the head ‘Income from other sources’. Briefly interest received or accrued on fixed and recurring deposits are 100% taxable but some tax relief will be provided on interest earned from saving bank accounts. According to the section 80TTA of Income Tax Act, interest earned from post office and bank saving accounts can claim deduction up to Rs. 10000 from the gross total income.
“there is some extra deduction in addition to section 80TTA will be provided if taxpayer have post office saving accounts. The interest earned from post office saving account will be exempt up to Rs. 3500 for an individual account and Rs. 7000 for an joint account u/s 10(15)(i) of Income Tax Act”
- Not filing income tax returns
Earlier if any people have long term capital gain which is exempt from tax and because of that exempted long term capital gain gross total income is below the tax payable limit then there is no need to file any ITR.
Now as per recent amendment in section 139(1) of the Income Tax Act, if you have any long term capital gain which is exempted from tax and if without this exemption your gross total income is exceed from minimum exemption limit then you have to file ITR.
For instance, let us assume that in a financial year your gross total income is Rs 1 lakh and long term exempted capital gains is Rs 2 lakh. Earlier you were not required to file income tax return as your total income was below the minimum exemption limit of Rs 2.5 lakh.
Now due to the recent amendment in tax laws, you are required to file ITR as your gross total income plus long term capital gains (Rs 1 lakh + Rs 2 lakh > Rs. 2.5 lakh) exceeds the minimum exemption limit.
- Not clubbing incomes
As per the provision of Income Tax Act section 60 to 64 “ for a taxpayer it is mandatory to add the income of specified persons in their total income at the time of ITR filing and tax is calculated on total income including specified persons income. Specified persons include minor children, spouse and son’s spouse. Mostly taxpayer will forget to add the income of their minor child in his income.
“if minor child income included in his parents income then taxpayer will claim an exemption of Rs. 1500 u/s 10(32). If you forget to include the income of minor child then you are liable to pay the tax due along with interest and also may be you are liable to pay the penalty of 50% of under reporting or 200% for mis-reporting of your income. Earlier this penalty was 100-300% of taxes avoided up to A.Y. 2016-17.
- Not reporting income from the last job
if you change your job in the previous financial year then you have to show the income of previous job and current job. If you forget to report any income receive from previous job then you are bound to show that difference in your TDS certificates, Form 16 and Form 26AS. And also it can bring a tax officer to your door. Penalties for this are same as clubbing of income.
- Not reporting tax free incomes
If you have any income which are tax free then you have to report such income in ITR. For example, interest earned from provident fund is a tax-free income but you have to report this income in your ITR. After that you can claim exemption under various sections of income tax act. All the exempted income will be shown under the head of ‘exempted income’ under the schedule of ITR.
- Not reporting all bank accounts
Earlier you are bound to report only one single bank account in which you to receive income tax refund (if any). But now from A.Y. 2015-16 you are required to give details of all the bank accounts held in previous year (for which ITR is filed) in his ITR. Only dormant accounts excluded to show in the ITR.
“you are mandatory to report all the details regarding cash deposited in your all bank accounts during the demonetization period of 09.11.16 to 30.11.16 for A.Y. 2017-18 if aggregate sum of cash deposited is exceed from Rs. 2 lakh for that demonetization period. If you are forget to report details of all bank accounts then it will treated as incorrect particulars and may be made liable for paying some penalties or even prosecution if it is proved that some taxes are remain escaped due to such non-reporting.”
8. Not declaring deemed rent/expected rent
In case if you have an another owned house other than self-occupied house and that another house is remain vacant then you have to report the expected rent of that house in your gross total income. Because that notional rent increase your gross total income that may lead to increase in tax and non reporting of that make you liable to pay some penalties as discuss above. If in any case you have taken a house loan on that property and you pay interest for that loan then you can claim benefit of some tax saving by set-off the loss from house property from interest has been capped at Rs. 2 lakh starting from 01.04.2017.
9. Failing to revise your income
in case if you find any error in ITR after filing the return then it is your duty to rectify that error by filing revised return. Earlier Income Tax Act allow you 2 years time period for filing revised return but now from financial year 2017-18 , only one year from the relevant financial year for which return is filed is allow.
“it is advised to all taxpayers that if they find any error in their ITR then rectify it as early as possible within the time and pay the remaining tax dues with interest to avoid the penalty of under reporting or mis-reporting. And also if you forget to take exemption or deduction in filing ITR then you can claim tax refunds by filing revised returns.”
- Presuming tax dept. doesn’t want you to file tax return:-
Uncommon mistake done by a taxpayer is presuming that he isn’t liable to file tax return. You’re liable to file return in following case even if taxes due from you has been paid by way of advance tax or TDS:
Your income exceeds basic exemption limit, which is Rs. 3 lakhs for senior citizens (age above 60 years), Rs. 5 lakhs for super senior citizens (age above 80 years) and Rs. 2.5 lakhs for all other individual taxpayers.
If you’re resident in India (other than not ordinarily resident) and you hold (as a beneficial owner or otherwise) any asset or financial interest in any entity located outside India or you have signing authority in any account located outside India. In this case you can’t file return in ITR-1.
- Check Form 26AS before filing ITR:-
Form 26 AS is your tax passbook and it reflects details of tax deducted (TDS) from your income and payment of advance-tax during the year. If you find any mistake in Form 26 AS then you should notify the same to tax deductor to rectify it. Tax department match the tax credit claimed by you in ITR and tax credit available in Form 26 AS. Tax department will deny credit of TDS claimed in ITR if it is not show in Form 26 AS. Further, if any entry is found in Form 26 AS but is not show in ITR, a tax notice will be received by you to explain the reason of not reporting it in ITR.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on. The author is a Chartered Accountant and the Chief Gardener & Founder Director of Rajput Jain & Associates , a leading Tax & Investment Planning Advisory Service Provider. His blog can be found at https://carajput.com/blog/For any query you can write to firstname.lastname@example.org. Hope the information will assist you in your Professional endeavors. For query or help, contact: email@example.com or call at 09811322785/4 9555 5555 480)